What is the true value of a new home priced at $400K if the builder's agent gets 3% of this amount and the buyer's agent gets another 3%?

Asked by Joo, 19464 Sat Mar 20, 2010

Is the true value 94% of 400K?

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9
Terrence Cha…, Home Owner, Allentown, PA
Sat Mar 20, 2010
True value is the amount a buyer is willing to pay for a property.

Terrence Charest, e-Pro
1 vote
Doc & Ellen…, Agent, San Antonio, TX
Sun Mar 21, 2010
While you are itemizing costs, don't forget to include the cost of the developing the lot, putting in streets and sidewalks, connecting utilities, designing and drawing the plans, surveying the lot, pouring the slab, framing the home, putting on the roof, installing the plumbing and wiring, hanging the drywall, ....

There are a lot of costs in building a home, including the cost of selling it. So, maybe you can find a builder who will let you do some of those tasks, too and save a few bucks. Not.

Doc
0 votes
Dianne Hicks, Agent, Rancho Bernardo, CA
Sun Mar 21, 2010
Just because agents are getting a commission, it does not really change the value because almost every home sold has cost associated with commissions. The real question on the table what is the true value, you should ask you realtor to show you recently sold homes in the area to have a better guage on true value.
0 votes
James Deskins, Agent, Worthington, OH
Sun Mar 21, 2010
Here's a better answer than my last one. What is the value of a $40,000 Lexus if the salesperson get's 5,000 for selling it.? O.k., what's the value of that Lexus at another dealership if it's $40,000 and that salesperson gets $3,000 for selling it? And what if you paid $40,000 for that same Lexus from a private seller? The value of the car is $40,000 in all cases if that's what you paid for it, regardless of who got what after the sale.

If you don't think so go ask the builder how much the house is if you don't have an agent. Guess what the answer from that builder will be: $400K. And what happens if the builder's agent quits while you are building the home and he doesn't have to pay the sales agent? Does that change the value of the house? Nope.

An appraiser never takes into account commissions, they are part of the sale. However, they do consider closing costs paid by the seller/builder.
0 votes
Edmund Choi, Agent, Paoli, PA
Sun Mar 21, 2010
True value is what a buyer is willing to pay for a property and what an appraiser values it, for lending purposes. All costs, including but not limited to marketing expenses, transfer taxes, inspections, certifications, etc., involved with the purchase and selling of a property is the cost of doing business.
0 votes
Heather Mori…, Agent, Allentown, PA
Sat Mar 20, 2010
The Market Value of a Property is the Market Value of a Property - This value is based on what other homes like this have sold for in the same community - This is how an appraiser will value the property. The way the seller spends his profit is his own business.

It's as easy as that.

The profit from a sale that is worth the Market Value of $400,000.00 may be spent on Mortgage Loans, Construction supplies, labor, commissions, land costs, employee payroll, any number of things. The bottom line is...it is none of anyone's business what the seller does with their money during or after the sale...They can hire professional real estate agents to handle this very important process or they can hire employee's and pay them or they can ever hire Attorney's. It really should not matter to the buyer...

The buyer's only concern is that they are not paying over current market value for the home. This information can only be given to you by a professional real estate agent in your area or an appraiser once the home is appraised.

I hope this information has helped you.
0 votes
Maureen Inge…, Agent, Media, PA
Sat Mar 20, 2010
It is not the builder's agent or the buyer's agent that gets the commission. It is the builder and the buyer's agent's real estate firm that gets the commission. The builder pays salary and/or commission to the site agent depending on how they set it up. I cannot speak to that. In the case of the real estate company, most companies take a percentage off the top of the commission to send to Corporate, typically 6-8%. What is left goes to the Broker of the company. The broker splits the remaining commission with the agent according to a contract they have between them-- 50/50. 60/40,70/30. When the agent receives their share, they pay all their staff (if they have a team or assistants) typically $10-20/hr. Many companies charge their agents an office or desk fee, copier paper fee ( color copies $.20/copy,), E and O insurance, phone line fees,internet and tech support fees,web site fees. Then there are lead generation expenses, enhancement to the MLS and Realtor.com, etc. charges, marketing exenses, appointment center charges....... That's just the tangible stuff. Now we get into the time spent on the phone, Blackberry and internet communication with all parties, other agents,title companies,mortgage companies, file work, follow up,MLS entry, conveyancing,searching for properties for the buyer and comparative market analyses for the seller (hours of work). We are on the phone from dawn to dusk,answering questions, putting out fires,checking up,negotiating contracts, home inspections,and the like, till weel into the night many times... 24/7. An attorney charges hourly and bill s monthly, regardless of the outcome of the case, in most instances. You know their fees. Realtors don't get their portion of the fee until after the property closes. Even after settlement, there is lots of followup. Sooo, now you see where the money goes and hopefully have a better understanding of the process. And, if the property appraises for $400,000, that's its worth. The commission is the cost of doing business.
0 votes
James Deskins, Agent, Worthington, OH
Sat Mar 20, 2010
The true value is 400K. Ask the appraiser. The commission comes OUT OF the price, it does not get added to it. If the seller pays 3K of your closing costs does that mean the appraiser will appraise the house at 397K? Nope.
0 votes
Robin Coons…, , Phoenix, AZ
Sat Mar 20, 2010
You are not including all the other closing costs. It's funny how sellers question the value of real estate agents. Many don't see what the agent goes through in order to sell their home, especially short sales. It is rare that things come together quickly, unless the seller is realistic about his price. First off things such as virtual tours, pictures, advertising, paying MLS and all the fees associated costs lots of money, the broker needs their split for all that they pay out., plus if it is a major real estate firm there is a franchise fee paid by the agent. The agent must attend schooling every year and know the law. Real estate agents also pay for Errors and Omission insurance, in the event someone in the transaction decides to sue. Plus you have daily phone calls, promoting the property, so the seller agent works on your home maybe 2-3 hours a day everyday including Saturdays or Sundays. In the meantime the buyer's agent is investigating all properties for his client, driving hours to find the perfect property and he also has the same expenses. Think of all the gas money. Then you have the escrow instructions, contracts, inspections etc. Let's say that during the year either one of the agents sell 5 homes a year at the same price. $400,000 x 3% = $12,000 x 5 = $60,000. Let's say the broker fee is 40%, franchise fee 10%, education and fees 8%, marketing properties 15%. Let me ask you a question : Would you work this hard for $2760 per house? If it's 3 hours a day for 90 days or 270 hours of work that's only $10.22 per hour or $13,800 per year. What do you think? Are agents worth it?
0 votes
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